Do Only Americans Own America?
Foreign investment in agricultural lands in the United States and its effects.
Foreign investment in the United States, while not a new phenomenon, has recently caught the attention of the American public and members of the U.S. House and Senate after an Air Force officer raised concerns when the Fufeng Group, based in Shandong, China, purchased 300 acres of farmland 12 miles from an Air Force base in Grand Forks, N.D., to build a corn milling plant5. National security concerns prompted the U.S. Senate to propose a bill prohibiting the purchase of land in the United States by companies or individuals from China, North Korea, Iran or Russia.
How prevalent is foreign investment?
The foreign direct investment in the United States (businesses and land) was $5.25 trillion at the close of 2022 (Fig. 1). This was an increase of $216.8 billion from 2021. Much of this investment was from companies and individuals from Europe, followed by Asia and Pacific Islands, Canada, Latin America, the Middle East, and Africa. The top investing country was Japan ($775.2 billion), followed by Canada ($683.8 billion) and the United Kingdon ($660.6 billion). Foreign direct investment in the United States has been concentrated in the manufacturing industry, with investment in the financial, insurance and wholesale trade industries also noteworthy9.
U.S. initiatives promoting foreign investment
Under the U.S. Department of Commerce, the United States promotes job-creating U.S. business investment to foreign, as well as domestic, investors through the SelectUSA program8. This program has been in existence since 2011 and was preceded by the Invest in America program. In their recent 2023 Investment Summit, nearly 2,300 international delegates participated, including 100 businesses from China1.
Fig. 1: Direct Investment Positions, 2021-20229 Click here for larger view. |
Understanding the scale of foreign investment
Foreign investment in the United States at the end of 2022 was surpassed by the $6.58 trillion invested by U.S. companies and individuals in other countries9, including ownership of more than 9 million acres in other countries6. The countries of interest targeted by these investment dollars generally mirrors those that are investing in the United States (Fig. 1).
The Agricultural Foreign Investment Disclosure Act of 1973 (AFIDA) established a mandatory reporting system overseen by the USDA, requiring foreign entities to complete an information form for all agricultural land purchased or leased (10-year minimum lease) within the United States. According to the most recent AFIDA report, almost 41 million acres of ag land in the United States is fully or partially owned by foreign entities10. This amounts to 3.1% of total U.S. ag land2.
Fig. 2: Total Acres of Foreign-owned Land by Country of Origin, 202110 Click here for larger view. |
Canadian entities own the most land (more than 9 million acres), followed by investors from the Netherlands, Italy and the United Kingdom (see Fig. 2). Chinese entities rank 18th on this list at 194,772 acres. Most of the land under Chinese title is located in North Carolina and Missouri and is owned by the largest pork processer in the United States, Smithfield, which was purchased by Shuanghui International in 20132. Almost 2.5 million acres are not appropriately identified in the reporting system, which is a concern for many national lawmakers as they are not sure who holds ownership of that land.
Almost 47% of the agricultural land owned or leased by individuals or investors from foreign countries is forest land, with just less than 29% in cropland and 17.8% in pastureland (see Fig. 3). Approximately 4.5% is considered other agricultural land and 2% other nonagricultural land, which includes roads and homesteads. A large portion of the forest land is owned by Canadian companies for the harvesting of timber.
Why do foreign entities invest in U.S. ag land?
Fig. 3: Acreage of U.S. agricultural and non-agricultural landholdings by foreign investors as of Dec. 31, 202110 Click here for larger view. |
Another motivator is our federal incentive programs. While foreign investors are not allowed to participate in certain disaster assistance programs, along with a few other programs administered by the USDA, they are allowed to participate in most farm programs if they meet the general criteria. However, recent legislation has been introduced that would restrict foreign persons from participating in specified programs administered by the USDA2.
A major incentive for the purchase or lease of ag lands by foreign entities has been the various clean-energy incentives. For example, the Inflation Reduction Act provides incentives for clean-energy projects such as solar farms and battery manufacturing, of which foreign investors with projects in the United States are eligible (Dvorak, 2023). Tom Venesky noted that a large number of foreign investors purchasing ag lands have wind or solar in their company title, and are thus suspected of purchasing or leasing many of their ag lands for clean energy generation11.
Pros and cons of foreign investment in U.S. ag land
While foreign investment adds to economic development in the United States and has reduced imports from some foreign countries who have established manufacturing facilities in the United States, there are downsides to foreign investment. Many are concerned with the erosion of national security, the theft of technology, the potential for intelligence gathering and the possible foreign control of the U.S. food and energy supply. Competition for land and other natural resources has proven to be a concern in some areas. For example, Almarai Co., a Saudi-owned dairy giant, owns 10,000 acres of alfalfa land in Arizona that is irrigated from scarce groundwater, with the hay shipped to Saudi Arabia to feed their large dairy herds6. The Arizona governor recently stripped this same company of other alfalfa-producing lands they lease from the state because of violations to their lease7.
Another concern is the potential effect on ag land values and lease rates. The USDA recently examined changes in ag land values and land rental rates across counties with varying levels of foreign ownership between 2012 and 20172. Their results indicated there were no statistical differences in ag land values or rental rates based on the level of foreign investment in each county. Obviously, the more individuals in the market for ag land, the greater the demand for the land, which would thus increase the land/lease price given the limited supply of land in the United States. But the number of foreign investors in the market for U.S. ag land was small enough they did not significantly or consistently influence land prices or lease rates.
While there are several reasons to be concerned about foreign ownership of U.S. resources, the major concern appears to be when foreign entities from countries that are in conflict with the United States obtain ownership of U.S. capital assets. The relatively small percentage of U.S. ag lands owned or leased by foreign entities will most likely continue to grow as individuals and companies from foreign countries seek to further their investments in the United States.
Editor’s note: Larry Van Tassell is a professor and the director for the Center for Agricultural Profitability at the University of Nebraska–Lincoln.
Sources:
1Flannery, Russell. (2023, May 5). Why Chinese Investment in the U.S. can Still be a Good Thing. https://www.forbes.com/sites/russellflannery/2023/05/05/why-chinese-investment-in-the-us-can-still-be-a-good-thing/?sh=37106c7e3147.
2Foreign Ownership and Holdings of U.S. Agricultural Land. (2023, January 24). Congressional Research Service. https://crsreports.congress.gov/product/pdf/IF/IF11977.
3Foreign Ownership of Agricultural Land: FAQs & Resource Library. (2023, July 11). The National Agricultural Law Center. https://nationalaglawcenter.org/foreign-investments-in-ag/.
4Halverson, Nathan. (2015, January 24). How China Purchased a Prime Cut of America’s Pork Industry. Reveal. https://revealnews.org/article/how-china-purchased-a-prime-cut-of-americas-pork-industry/.
5Javers, Eamon. (2022, July 1). Chinese company’s purchase of North Dakota farmland raises national security concerns in Washington. CNBC. https://www.cnbc.com/2022/07/01/chinese-purchase-of-north-dakota-farmland-raises-national-security-concerns-in-washington.html.
6Lutz, Jamie and Caitlin Welsh. (2021, September 8). Foreign Purchases of U.S. Agricultural Land: Facts, Figures, and an Assessment of Real Threats. Center for Strategic & International Studies. https://www.csis.org/analysis/foreign-purchases-us-agricultural-land-facts-figures-and-assessment-real-threats.
7Naishadham, Suman and The Associated Press. (2023, October 4). Saudi Arabia was pumping water on 10,000 acres of drought-stricken Arizona. Fortune. https://fortune.com/2023/10/04/saudi-arabia-stripped-leases-arizona-drought-pumping-groundwater-fondomonte-almarai/.
8SelectUSA. (2023, October 9). U.S. Department of Commerce. https://www.trade.gov/selectusa-home.
9U.S. Bureau of Economic Analysis (USBEA). (2023, July 20). Direct Investment by Country and Industry, 2022. News Release BEA 22-32. https://www.bea.gov/news/2023/direct-investment-country-and-industry-2022.
10U.S. Department of Agriculture/Farm Service Agency (USDA/FSA). Foreign Holdings of U.S. Agricultural Land Through December 31, 2021. (2023, July 12). USDA/FSA. http://www.fsa.usda.gov/programs-and-services/economic-and-policy-analysis/afida/index.
11Venesky, Tom. (2023, February 24). Foreign Ownership of US Farmland on the Rise. Lancaster Farming. https://www.lancasterfarming.com/farming-news/news/foreign-ownership-of-us-farmland-on-the-rise/article_c5a88e10-b486-11ed-81cd-17edd0df8b58.html.
